4 million U.S. homeowners still underwater

While progress has been made, Zillow report finds stubborn problem remains

While the U.S. negative equity rate among mortgaged homeowners is dropping, more than 4 million still owe the bank at least 20 percent more than their homes are worth, according to the first quarter Zillow Negative Equity Report.

That means those homes would have to appreciate at least 20 percent for their owners to have any chance of breaking even on a sale. Home values are forecast to continue rising, but at a slower pace than recent years.

Nevertheless, the national negative equity rate of 15.4 percent is 3.4 points lower than the first the 18.8 percent rate in the first quarter of 2014. In addition, the rate of negative equity improved in all of the 35 largest housing markets in the first quarter of 2015.

According to Zillow, at the peak of the real estate crisis, more than 15 million U.S. homeowners owed more on their mortgages than their homes were worth, putting them in negative equity.

Zillow reported that the rate of underwater homeowners was much higher among the homes with the lowest value. More than 25 percent of those who own the least valuable third of homes were upside down, compared to about 8 percent of the most valuable third of homes.

Among the 35 largest housing markets, Las Vegas, Chicago and Atlanta had the highest rates of homeowners in negative equity. A smaller share of homeowners were upside down in Miami and Detroit, but homeowners there were more deeply underwater. In both places, over 60 percent of homeowners in negative equity were more than 20 percent underwater.